Widespread Unfairness in Rising Property Insurance Premiums Exposed

A new report by Americans for Financial Reform Education Fund (AFREF) and Public Citizen reveals alarming practices in the property insurance industry, where insurers disproportionately penalize customers with lower credit scores, exacerbating household financial instability and highlighting the need for public oversight. The report, "Rising Property Insurance Premiums: Uneven Risks to Households," exposes how insurers unfairly use credit scores, despite their unconnectedness to actual disaster risk, and warns of emerging challenges to insurance accessibility for multifamily housing development.

Key Takeaways:

• Insurers unfairly penalize customers with lower credit scores, worsening household financial health, with the median credit score of Black or Latine homeowners being lower than that of white homeowners due to systemic barriers and racialized predatory lending strategies.
• Credit scores are not an accurate predictor of repayment for insurance policies, as insurers can simply cancel coverage if premiums are not paid.
• The insurance affordability crisis is harming overall household financial health, driving debt accumulation, and worsening mortgage performance, introducing risk into key government housing finance agencies.
• A cumulative effect of the crisis is likely to degrade performance of mortgage-backed securities, with the crisis also restricting affordable multifamily housing development.
• Public Citizen's Carly Fabian emphasizes the need for state insurance commissioners and elected officials to focus on reducing home insurance prices through investments in climate mitigation and resilience.
• AFREF's Caroline Nagy highlights the ongoing housing market stability crisis and the need to address the deliberate inequity in the insurance rate setting process.

Statistics:

• According to the report, credit scores are being used in unfair, particularly regressive, ways, unconnected to households' actual level of disaster risk.
• The median credit score of a Black or Latine homeowner is lower than that of a white homeowner.
• The insurance affordability crisis is introducing risk into at least two key government housing finance agencies.
• A cumulative effect will likely be to degrade performance of mortgage-backed securities.
• The crisis is also restricting affordable multifamily housing development.

Sources:

• Americans for Financial Reform Education Fund (AFREF) and Public Citizen report, "Rising Property Insurance Premiums: Uneven Risks to Households"